Question

Casino Ltd is a company that owns a large holiday resort on Queensland’s Gold Coast. Casino Ltd employs 100 people who work in the catering, cleaning and the hospitality outlets of the resort. The company and its employees have had a history of industrial disputes involving wages and conditions. After the most recent dispute, Casino Ltd and its employees came to an agreement on 1 July 2005, under which it was agreed that all of its employees were to be paid wages and salaries that are in excess of other employees working in similar resorts in Australia. One month after the agreement was made, a new company was incorporated which is a wholly owned subsidiary of Casino Ltd. The new company is called Caterers Ltd. It has three directors, all of whom are appointed from the board of five directors of Casino Ltd. Caterers Ltd.’s constitution had a clause which stated that all of the profits of Caterers Ltd will be distributed as dividend to Casino Ltd. The incorporation of Caterers Ltd was preceded by a meeting between the board of directors and the senior managers of Casino Ltd where the reason for the creation of the new entity was discussed. The senior managers of Casino Ltd devised a strategic plan which called for a new corporate structure which will take into account that the catering and entertainment services of Casino Ltd has the potential to become a significant operation in its own right both within and outside the resort. The directors of Casino Ltd were genuinely impressed with the plan and believed it was in the long term interests of the company. They passed a resolution that the management of Casino Ltd put into place matters that will allow Caterers Ltd to pursue this new strategic objective. The redevelopment of the current resort was central to the management plan approved by the board of Casino Ltd in relation to the creation of Caterers. This meant closure of many of the restaurants in the resort and the redundancy of 60 employees. These redundant employees were offered new, but identical, positions working in Caterers Ltd. Faced with the choice of an uncertain future, all 60 employees accepted the job offer with Caterers Ltd. As a result, the redundant employees no longer work under the previous 1 July 2005 contract of employment they had while working for Casino Ltd. Instead, they work under wages and conditions that are not as favourable as they had while working for Casino Ltd. However, these wages and conditions are comparable to people who work in similar industries. Caterers Ltd, through its employees, started running the catering and entertainment services in the resort and due to the huge success of the business, Caterers expanded beyond the resort and started leasing outside premises to run a bigger catering and entertainment business. The Trade Union, on behalf of the 60 employees working for Caterers Ltd is concerned about the practical effect of this corporate reorganization on employment conditions. Assuming that the 1 July 2005 agreement between Casino Ltd and its employees is valid and that Caterers Ltd has been validly incorporated, advice the trade union as to its chances of success in enforcing that agreement. Refer to relevant statutes and case law based on Company Law.  

Answer 1

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Explanation:

Terms of the agreement

It is clear from the agreement with Casino Ltd that workers will earn greater salaries than other people employed in the same resort while they are still under employment with Casino Ltd. This will mean that the terms of this agreement are no longer valid when the employees' contract of employment terminates and the employees are no longer employed by Casino Ltd.

Formation of Caterers Ltd

In actual reality, Casino Ltd has conducted renovation activities and has chosen to create a new company which only manages and operates unique catering services in the resort, as well as the majority of the services left for the resort to run for themselves but which are operated by Casino Ltd.

In actual reality, Casino Ltd has conducted renovation activities and has chosen to create a new company which only manages and operates unique catering services in the resort, as well as the majority of the services left for the resort to run for themselves but which are operated by Casino Ltd.

Termination of the agreement

Since employees with Casino Ltd were fired during the renovation period, the agreement meant that employees with a high salary in similar resorts were no longer binding to the company than the other employees.

Similarly, Caterers Ltd workers were not recruited by Casino Ltd, and Casino Ltd did not organize or plan for employee recruitment. While Casino Ltd was a holding company of Caterers Ltd, the company is a separate legal entity, established on common law, and is legally responsible for any acts not directed by Casino Ltd. Therefore, the syndicate can not succeed in enforcing the agreement between the employees and Casino Ltd. This is fair.

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